N40tn Mortgage Finance Needed for Housing Shortage – FMBN

The Federal Mortgage Bank of Nigeria has said that the country needs over N40tn in mortgage finance to address the present housing shortage.

The bank, in a document made available to Punchng correspondent, noted that the mortgage finance must be affordable to have the desired effect.

According to the bank, homeownership rate in the country is currently at about 25 per cent, a ratio it considers low compared with figures from countries with entrenched mortgage markets.

The banks stated, “The building and construction sector, inclusive of housing, contributes a mere 1.62 per cent to the Gross Domestic Product, a dismal figure compared to contributions ranging from between 30-40 per cent to 60-80 per cent in emerging and developed economies, respectively.

“The mortgage sector contributes less than one per cent to the GDP compared to what obtains in other countries such as the USA, with 63 per cent; Britain, 64 per cent; Germany, 55 per cent; Thailand, 15 per cent; South Africa, 20 per cent, India, five per cent and Ghana, three per cent.”

The FMBN noted that 36 per cent of the Nigerian population currently reside in cities with the rural-urban migration as high as five per cent per annum, putting great demand on urban housing.

The bank added that while the country’s housing deficit had been put in the region of 14 to 17 million units, with 72 to 102 million Nigerians without access to decent housing, mortgage loans and advances by banks were still insignificant due to their long-term nature compared to the short-term nature of bank’s liabilities.

The President, Mortgage Bankers Association of Nigeria and Chief Executive Officer of Homebase Mortgage Bank Limited, Dr. Femi Johnson, stated that rather than thinking of mortgage financing, stakeholders should focus on making houses available by increasing the housing stock.

He said, “The houses don’t even exist; we need to find money to build these houses first. When an investor brings his money to build houses, depending on if he is on a short or long-term investment, because if he is a short-term investor, he wants to sell and take his money out, but if he’s a long-term investor, that money for construction is the same that is converted to mortgages and people pay over a long period before the investor exits eventually.

“Today, we have over N10tn in the pension fund; this is long-term money that can go into providing mortgages. I think the major issue is to find money to build the houses first. When they are available, money will come. There are so many places to source for funds, the capital market and the World Bank, for instance, are there.”

Johnson noted that with the way the country was structured, it would be difficult to meet the housing needs of the citizens.

“The truth is that with the way we are structured in Nigeria today, it will be difficult for us to build one million houses annually; and even if we do, it will take us almost 25 years to reduce the deficit. So, we shouldn’t be thinking of mortgages yet; at best, we should be looking at construction,” he said.

The Chairman, Sparklight Property Development Company Limited, Chief Toyin Adeyinka, said the government needed to prioritise affordable housing by investing more money in creating the housing stock.

According to him, the FMBN can begin by effectively managing the National Housing Fund through timely loan delivery to encourage investors.

“If the NHF is properly managed and if people are given the loans they applied for early, many people will be interested and that pool of fund can be very useful. It is all based on the determination of the government, and of course, the FMBN, to improve their delivery system,” Adeyinka added.